When your maternity and/or paternity leave comes to an end, unless you are lucky enough that one or both of you work from home, or you have a parent who is available and happy to look after the baby while you are at work, you need to organise childcare.
Unfortunately, as much as you would probably like to stay at home with your new bundle of joy, you need to get back to the 9-5 for some much-needed adult conversation and even more importantly, so you can afford to keep your baby in nappies and milk.
However, childcare doesn’t come cheap and it will eat away at your salary before you even start paying for the other day-to-day essentials that your little one requires.
But, did you know that there is plenty of help available from the government and employers, from tax credits and tax-free vouchers to childcare vouchers.
So, what are childcare vouchers?
Childcare vouchers are given to you by your employer to help pay for childcare. You can choose your own childcare provider, as long as they are registered with or approved by Ofsted.
Depending on your employer this could be offered as a benefit on top of your ordinary salary, or you may have to receive it through a ‘salary sacrifice’ scheme – where you permanently give up some of your pay in return for childcare vouchers.
Top Tip: You might find you are better off claiming tax credits instead of using a salary sacrifice scheme.
So, how much can you get?
This will depend on the Income Tax you pay:
- The basic rate of 20% = £243 a month
- The higher rate of 40% = £124 a month
- The additional rate of 45% = £110 a month
Each parent is entitled to the above amounts in childcare vouchers without having to pay tax or National Insurance. Any extra vouchers your employer gives you will be taxed unless you earn less than £8,500 a year.
Childcare vouchers can affect the amount of tax credits you get. The government have a handy calculator that can help you decide if you would be financially better off taking the vouchers or not. In some circumstances vouchers can be worth more – if you can’t claim tax credits for example. Or if your childcare costs are above the current childcare limits.
However, you will always be better off accepting childcare vouchers if:
- You have 1 child and they don’t normally live with you
- Your employer offers you childcare vouchers without reducing your pay
It will depend on your personal circumstances whether childcare vouchers will be financially helpful to your or not. But, just know they are one of many options. So, there will be something out there, which will help you with the costs of caring for your children – just consider your individual situation to help you choose the best one.
*This is a collaborative post*